A cynical commentary about developments in the South African financial markets and the incomprehensible activities and pronouncements of bureaucrats and politicians.

Monday, 27 July 2015

MANY PRICES. HIDDEN VALUES

Supporters of the curious belief that
committees are far better than markets in setting prices will need to explain
to the rest of us just what effects they expect from adding 25cents a year to
the cost of borrowing R100. Allegedly this week’s adjustment to the repo rate
is going to send a message to all those who are supposedly conspiring to raise
the rate of inflation above a level which has been deemed appropriate (by
another committee, naturally). Always assuming of course that we can agree just
how much inflation is happening and what is causing it – two very unlikely
events.

So far the share, bond and currency
markets seem utterly indifferent to the result of two days of strenuous
thinking at the Reserve Bank. They all do still have an air of edginess about
them, however – especially the currency market and especially against sterling.
Whether this is because the apparent official campaign to discourage tourists
is having its largest impact on potential visitors from the UK is hard to
prove. Certainly the anecdotes in the media suggest that SA as a destination is
falling off the radar screens. The minister responsible for this strange policy
has yet to offer a credible reason for his stubborn stance.

Those who believe that gold is merely a
resource like all other minerals extracted from the earth will be smug to point
out that its price is also falling sharply together with the prices of just about every
other “hard” commodity. Notably however, the prices of most food commodities
have been steadily rising in the past few months. Explanations for both
phenomena are plentiful and many have the common factor of just how big and
significant China
has become when working out who consumes what. And the suggestion is that they
are eating more and building less. If any omniscient committee of bureaucrats
saw this coming they failed to do anything effective about it and now the
markets are sorting it out for themselves. Here in SA the steel business is in
survival mode with the iron ore miner (Kumba) missing a dividend and steel
manufacturers mothballing plants. Somewhere here, however, there are bargains
to be found.

With the demise of the steam locomotive
perhaps the desire of every small boy to be a train driver has declined
somewhat. But not for the guys who run our railways it seems. They have been
spending wads of cash on bigger and newer trains and in the process teaching
the rest of us new words and meanings like perways and gauges and depots.
Allegedly, however, some of the new toys don’t quite fit the existing layouts
and we are not yet invited to come and play with the new kit. Extra track and
adjustments to the platforms and scenery may be needed. Unkind folk are
suggesting that it may turnout to be a tremendous waste of money. That’s a
great pity because one of the features of driving through the great South
African landscape is the paucity of freight trains on the railway lines running
alongside the truck-filled road. So much stuff including people ought to be travelling
by train.

The interfering fingerprints of
politicians are all over the design
of next year’s Super 18 rugby tournament. The increase of three over this year’s
complement is achieved with the inclusion of the Kings from the Eastern Cape and a side from each of Japan and Argentina.Unsurprisingly the Aussies and Kiwis have
rejected any change to their local arrangements and South Africa will be the victim of
a biased restructuring of the competition. Cricket fans are also battling to
find enjoyment at present as the Proteas are being forced to take the long
routes in Bangladesh.
At least the pleasingly many South African connections in the Tour de France
are providing some pleasure for this couch sitter.

Why, do you think,
does the Johannesburg City Power Department need to call for tenders from Gym
Freelancers (Locum)? And don’t tell me it’s because the full-time one is on
leave!